A:

Bonds usually can be purchased from a bond broker through full service or discount brokerage channels, similar to the way stocks are purchased from a stockbroker. Dealing with a bond broker can be prohibitive to some, however, because many require high minimum initial deposits. Another way to gain exposure in bonds would be to go in directly through a bond fund - a mutual fund that only purchases bonds.

When using a broker to purchase bonds, often you will be told that the trade is free of commission. What often happens, however, is that the price is marked up so that the higher price you are charged essentially includes commission fees. If the broker isn't earning anything off of the transaction, he or she probably would not offer the service. To determine the markup before purchase, look up the latest quote for the bond and use your discretion to decide whether or not the commission fee is a markup you are willing to accept. (To learn more about what to look for in a broker, make sure to read our related article Evaluating Your Broker.)

Government bonds work slightly different than traditional bonds. Some financial institutions provide services to their clients that allow them to purchase government bonds such as Treasuries (U.S.) or Canada Savings Bonds (Canada) through their regular investment accounts. If this service is not available to you through your financial institution, these securities can be purchased directly from the government. In the U.S., bonds can be purchased through TreasuryDirect.

To learn more about bonds, how they work, and how to obtain them, be sure to check out our Bond Basics Tutorial.

RELATED FAQS

  1. How do I calculate the expected return of my portfolio in Excel?

    Find out how to calculate the total expected annual return of your portfolio in Microsoft Excel using the value and return ...
  2. What are the main factors that affect stocks in the telecommunications sector?

    Read about the factors that drive share prices in the stock market, and learn some of the trends in the telecommunications ...
  3. What factors are the primary drivers of share prices in the retail sector?

    Find out which factors investors need to consider when evaluating companies in the retail sector, including the basic fundamentals.
  4. What is the average return on equity for a company in the retail sector?

    Find out more about return on equity, how to calculate it and the average return on equity for companies in the retail sector.
RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt ...
  4. Hindsight Bias

    A psychological phenomenon in which past events seem to be more ...
  5. Paper Trade

    Using simulated trading to practice buying and selling securities ...
  6. Series I Bond

    A non-marketable, interest-bearing U.S. government savings bond ...

You May Also Like

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: iShares Barclays 20+ Year ...

  2. Stock Analysis

    Top 5 Emerging Market Bond ETFs

  3. Economics

    Tech Startup Momentum Being Generated ...

  4. Mutual Funds & ETFs

    How To Short The U.S. Bond Market

  5. Active Trading Fundamentals

    Who are Charles Schwab's (SCHW) main ...

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!